The UK must rapidly catalyse increased levels of private investment if it is to overcome an annual £5.6bn financing gap for nature recovery projects, according to a major new report published today.
Led by the Broadway Initiative, Finance Earth, and the Green Finance Institute, the report includes a roadmap that aims to “make the UK a highly attractive market for nature-based investment”.
As such, it aims to tackle existing barriers to private investment in nature-related projects, including the undervaluation of natural assets, a lack of tested revenue streams and standards for nature recovery projects, complex and misaligned environmental regulations, expertise and capacity gaps across the nascent market.
The roadmap also sets out how the UK could modernise regulations, leverage public expenditure, and secure large-scale private investment to significantly enhance nature and biodiversity by 2030.
The report’s recommendations include establishing new demand-side drivers for nature recovery, reforming economic and environmental regulation to incentivise a more efficient delivery of environmental outcomes, and establishing a governance and institutional architecture for fledgling UK environmental markets.
The paper, titled Financing UK Nature Recovery Coalition’s: Recommendations and Roadmap Reportalso proposes how private investment could drive nature recovery in the UK by matching different types of private sector capital to investment opportunities that meet different levels of expected risk and return.
James Mansfield, CEO of Finance Earth, said: “This roadmap will play an important role in accelerating a high-integrity market in nature recovery in the UK, and doing so in ways that benefit local communities.
“We see significant momentum in the sustainable finance market and through the right partnerships, we can catalyse the recovery of UK nature at pace. Scaling-up investment in the UK’s nature recovery could not be more urgent and Finance Earth is pleased to play its part. in helping to unlock the finance needed.”
The report considered views and gained support from over 50 organizations and companies, including the UK government, Federated Hermes, the National Farmers Union, and the Country Land and Business Association (CLA). It is also endorsed by the Confederation of British Industry (CBI), Water UK, and the RSPB.
Advocates of private sector investment in nature recovery projects maintain that private finance is needed to accelerate the restoration and expansion of natural carbon sinks and scale up emerging nature-friendly practices such as regenerative agriculture in support of both corporate and economy-wide net zero goals.
However, there is an on-going debate over how best to generate reliable returns from such projects, with a confusing and at times controversial patchwork of different policy frameworks and market-based mechanisms trying to attract private investors to support nature recovery projects, such as carbon offset markets, biodiversity offset schemes, and proposed reforms to farming subsides.
As such, the new roadmap aims to set out how an effective policy and regulatory framework could both trigger multi-billion pound investment in nature recovery projects and provide assurance that such projects deliver promised carbon and biodiversity gains and do not result in negative unintended consequences.
In related news, the report comes on the same day as the Voluntary Carbon Markets Integrity (VCMI) initiative and UK government launched a new draft code of practice for carbon offset projects to help ensure carbon offset projects deliver promised long term emissions savings. The code is now set to be tested by a host of leading multinationals, many of which are looking to ramp up investment in nature recovery projects as part of their net zero strategies.
A version of this first article appeared at Investment Week.